When an investment product like a fixed deposit, bond or insurance policy is nearing maturity, investors face the decision of whether to reinvest or redeem it. There are several factors to consider when dealing with a maturing investment.
Evaluate investment performance before maturity
Before a matured investment expires, review its performance over the investment duration. Calculate the actual returns generated compared to expected returns. This helps decide whether to continue staying invested in the same product or explore alternatives.
Understand reinvestment options if extending investment
If choosing to reinvest, understand the new product features, returns being offered, liquidity, risk factors and tax implications. Review if the investment objective remains the same and the product still suits the risk profile.
Consider market conditions while deciding to redeem
If market interest rates have moved up considerably since the original investment date, redeeming and reinvesting may fetch better returns. But if interest rates have fallen, extending the same investment may work better.
Evaluate alternate investment products before maturity
Research other available investment products in advance before maturity date arrives. Compare parameters like returns, tenure, risk factors, flexibility to redeem, etc. This aids the decision to redeem and switch to a better option.
Plan beforehand to reduce hassle near maturity
Instead of deciding hurriedly on maturity date, have a plan beforehand on whether to reinvest, redeem or switch products. Start paperwork for reinvesting or redeeming well in advance to avoid delays.
With prudent planning and information gathering ahead of an investment product’s maturity date, investors can make informed decisions on whether to redeem, reinvest or switch to other suitable options.